Hewlett Packard Enterprises to Sell Software Business for $10 Billion?

A possible deal would have the twofold effect of giving HPE an infusion of cash and allow it to focus more on its enterprise hardware offerings, such as networking, data center and storage equipment, as well as technology services.

by Rex Crum, The Mercury News
/
September 6, 2016

(TNS) -- The tech pioneer that was Hewlett-Packard may be on the brink of becoming an even smaller shadow of its former self.

Hewlett Packard Enterprise, one of the two companies emerging from HP’s split in 2015, is reportedly looking to sell its software business for between $8 billion and $10 billion. The deal would have the twofold effect of giving HPE an infusion of cash and allow it to focus more on its enterprise hardware offerings, such as networking, data center and storage equipment, as well as technology services.

A report from Reuters said HPE was in talks to sell its software business to Thoma Bravo, a buyout firm known for acquiring enterprise-software companies such as Compuware and Dynatrace. According to “people familiar with the matter,” HPE has hired Goldman Sachs to manage the sale process. Thoma Bravo has made the highest offer, but no deal has yet been finalized, the report said.

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HPE would neither confirm nor deny that it is shopping around its software business. “As a policy, we don’t comment on rumors and speculation,” a company spokeswoman said.

Glenn O’Donnell, a technology industry analyst with Forrester Research, said that while no sale of HPE’s software business is official, such a deal would play into the direction the company has taken since it separated from HP Inc. That company took on responsibility for Hewlett-Packard’s personal computer and printing businesses.

“HPE is betting on (being) smaller, while a rival like Dell is betting on (getting) bigger,” O’Donnell said. “The market will determine which one wins.”

HPE’s software offerings include cybersecurity company ArcSight, big-data analytics platform Vertics and the remnants of its $4.5 billion acquisition of Mercury Interactive in 2006.

Additionally, it would be offering HP Autonomy, acquired in the notorious 2011 purchase of British software company Autonomy, for $11 billion. It was the fallout from the Autonomy deal that led to the end of the brief tenure of Leo Apotheker as HP’s chief executive. The company eventually brought in Meg Whitman as CEO and ended up writing down nearly the entire Autonomy purchase.

Whitman remained as HPE’s CEO after the split, and her strategy for the company revolves around services and high-end business technologies. The software business brought in $3.6 billion in revenue in 2015, but that was a decline from the $3.9 billion the division recorded in 2014.

“Selling the software business fits in with the strategy of breaking into smaller pieces, which is the company’s plan now,” O’Donnnell said. “There’s a lot of merit in that position, as a lot of those software components are not necessarily at the core for them. They could also raise a good amount of cash and focus on their hardware offerings.”

The timing of the report hints at the possibility a sale of HPE’s software business could be announced Wednesday, when the company is scheduled to deliver its fiscal third-quarter results. Analysts surveyed by Thomson Reuters estimate HPE will post a profit of 44 cents a share on $12.64 billion in sales.

For the year, HPE shares have risen more than 45 percent to trade Friday at $22.17.